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Knowledge Base

A Better Way to Preserve the Environment

What is free market environmentalism?

Free market environmentalism connects self-interest to protecting resources by establishing private property rights of environmental resources. Property rights compel owners to account for the costs and benefits of their actions and facilitate market transactions that create efficiency-enhancing gains from trade. Property rights and markets can provide the right incentives, without relying on altruism or good intentions.

Free market environmentalism comes down to who holds environmental property rights. That could range from private individuals, to the government, to no one. If the answer is that no one owns them, environmental tragedy will result. However, when property rights are well defined and enforced, markets get the incentives right for improving environmental quality.

What benefits do markets bring to environmental policy?

Markets process information much faster than regulators can. The environment is a complex system, and the lack of property rights often exposes environmental policy to the tragedy of the commons. When property rights are well defined and enforced, markets get the incentives right for improving environmental quality.

What is the tragedy of the commons?

The tragedy of the commons is a problem where individuals have the incentive to consume more of a common good than is sustainable over the long-term. It often occurs when there is a lack of well-defined property rights, leading to little cost of over consuming at an individual level.

Eliminating the tragedy of the commons requires limiting and clarifying who gets to use and derive value from scarce natural resources. It’s helpful to think about where tragedy of the commons does not occur: Namely in private markets where every property right is clearly articulated and owned. Free market environmentalism is an effort to eliminate the tragedy of the commons by making sure all costs are accounted for by establishing clear property rights.

What is a “catch share?”

Property rights known as individual fishing quotas (IQFs) or “catch shares” entitle each quota holder to a share or percentage of the total allowable catch in a fishing market. Those catch shares are transferable, so fishermen who want to enter the market can buy quotas or vice versa from those trying to leave the fishery or reduce the size of their operation.

What is bycatch?

Fishermen sometime catch and discard fish they do not want, cannot sell, or are not allowed to keep. This is collectively known as bycatch and is an ecological and economical issue.

Fish that are discarded often die and cannot reproduce, impacting vulnerable ecosystems. It can also slow the rebuilding of overfished stocks and place protected species at further disadvantage. Meanwhile, bycatch of one species may limit opportunities to fish for other species. This creates uncertainty and economic costs for fisherman.